Mortgage or continue renting?

blcouriers

Hi there,
Me and my wife are trying to decide wether, getting a mortgage and owning our own property is the 'be all, n end all' of securing our finances in the future?
I've been looking at the cost involved in borrowing to buy a house and wondered if there was possibly an alternative to having our future finances sorted?
If we borrow £140,000, we pay back between £220,000-£230,000 over 25yrs at roughly £750-£800 P/Month, now this is what we're paying in rent at the moment, but we don't have to worry about repairs etc. So we currently have a SMALL surplus each month that we save, but I think owning a house would probably cost us that surplus in upkeep, leaving us unable to save any extra for the future.
Is it maybe another option for people on a reasonably low income, to continue renting and just aim at saving their small surplus towards a large pension/savings pot, rather than putting every penny into owning and maintaining a home?
So basically my question is, would reaching retirement age with a home all paid for(or possibly a V small mortgage) be better than reaching those later years in a rented property with a LARGE nest egg?
Sorry for the essay and thanks for reading;)

beecher2

If you'd have to put every spare penny into a mortgage then, in my opinion, it isn't affordable. Everyone's situation is different though, so only you can tell what is best for you. I take it you have your 10% deposit plus fees already saved up and have a big enough salary for a £140,000 mortgage, plus excellent credit rating?

dippy

blcouriers, you appear to be very sensible and have your head on your shoulders.

You're right, before buying a house in the current climate, it's sensible to have:

a/ a good deposit, at least 10-15+%, to get a reasonable rate and to protect against falls in house prices
b/ savings to deal with stamp duty, surveys, sollicitors fees
c/ a good margin of disposable income or further savings to deal with repairs, etc.

If you've got these covered, then remember to compare only the interest part of the mortgage against your rent. The repayment part is being used to buy you a home and is thus a saving (assuming static house prices).

anniecave

beecher2 wrote: »

.... plus excellent credit rating?

I wouldn't say you need an "excellent" credit rating to get a mortgage. I looked into getting a mortgage about 18 months ago and I was advised the difference between fair, good and excellent credit ratings aren't so relevant if you're looking at a mortgages. I've never had an "excellent" rating, nor ever qualified for the credit cards that want an "excellent" credit score, but I certainly would have been able to get a mainstream mortgage.

The situation would be different with missed payments, defaults, CCJs, or having entered into an IVA/DRO or been bankrupt, as these are taken into account when applying for a mortgage.

blcouriers

beecher2 wrote: »

If you'd have to put every spare penny into a mortgage then, in my opinion, it isn't affordable.
Everyone's situation is different though, so only you can tell what is best for you. I take it you have your 10% deposit plus fees already saved up and have a big enough salary for a £140,000 mortgage, plus excellent credit rating?

This was my point. I feel as though a mortgage wouldn't be wise, and baring in mind your point about the 10% deposit and fees, etc, we would have to save for another 5yrs before being in a position to apply for the above mortgage and once commited to said mortgage, we would have NO scope for savings and pension funds, due to the added financial drains associated with owning a home, buildings insurance, life insurance, repairs and maintenance.
The only benefit I can see is, once the home is fully paid for(near retirement), you could sell up and maybe buy smaller and have a small profit from the sale.
But during this time we'd have unable to put anything aside for income, other than receiving a state pension.
I may be getting ahead of myself a little at the ripe old age of 30:p, but we're on low/average incomes and haven't got a huge amount saved and want to make a good choice rather than following the staus quo.
Seems that buying a house at any cost and hoping the interest rates don't get too high and that the house won't have any major issues needing sorting(windows, roof, boiler, etc) is a little risky and we'd be better placed renting and just saving for the future?

dippy

blcouriers wrote: »

Seems that buying a house at any cost and hoping the interest rates don't get too high and that the house won't have any major issues needing sorting(windows, roof, boiler, etc) is a little risky and we'd be better placed renting and just saving for the future?

Save like mad and look for evening courses/promotions. Get yourself in a good position and a good financial cushion.

When the conditions are right, you will be best positioned. There are cycles to everything. The good times will come again.

sennypijama

blcouriers wrote: »

If we borrow £140,000, we pay back between £220,000-£230,000 over 25yrs at roughly £750-£800 P/Month, now this is what we're paying in rent at the moment, but we don't have to worry about repairs etc. So we currently have a SMALL surplus each month that we save, but I think owning a house would probably cost us that surplus in upkeep, leaving us unable to save any extra for the future.

Every current long term indicator predicts that interest rates will rise in the next 3-5 years. In fact, it's almost impossible to believe that they will not.

So, your mortgage payments will rise, and given what you've said above, you will not be able to afford them.

Calculate the mortgage payments if interest rates were 3% higher, or 5% higher, or perhaps even 7% higher, and add that to your decision-making.

Unless you're able to get a 25-year fixed term mortgage of course.

hcb42

or getting a career break..

Meeper

As I have written elsewhere, my professional opinion is that home-ownership is NOT the golden goose it used to be, or people think that it still is. I am, for example, in the process of selling my house to move into rented accommodation and channel the savings I make monthly (as well as the equity) into long-term investments and savings plans.

blcouriers

Meeper wrote: »

As I have written elsewhere, my professional opinion is that home-ownership is NOT the golden goose it used to be, or people think that it still is. I am, for example, in the process of selling my house to move into rented accommodation and channel the savings I make monthly (as well as the equity) into long-term investments and savings plans.

This was the other option we were considering, maybe focusing our surplus plus any bonus or overtime into long term savings or investments.
I'd need to take a good look at the products available(& risks involved), but the fact this is the route you yourself have taken, seems it may be a good alternative to buying a house.
Thanks

blcouriers

sennypijama wrote: »

Every current long term indicator predicts that interest rates will rise in the next 3-5 years. In fact, it's almost impossible to believe that they will not.

So, your mortgage payments will rise, and given what you've said above, you will not be able to afford them.

Calculate the mortgage payments if interest rates were 3% higher, or 5% higher, or perhaps even 7% higher, and add that to your decision-making.

Unless you're able to get a 25-year fixed term mortgage of course.

Thats what had me looking at alternatives, an increase of a few percent or more would make it close to impossible to survive each month.
I suppose we could always look to buy smaller and leave a bigger surplus each month allowing us wiggle room for interest rate increases and unexpected repairs/bills etc.
But surely we'd just end up buying bigger at a later date, therefore extending and increasing our mortgage over even more years, possibly leaving us to pay a mortgage into retiremnet.